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Non-monotonic Repayment Contracts are Superior: An Experimental Approach

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  • Reiss, J. Philipp
  • Wolff, Irenaeus

    (METEOR)

Abstract

We experimentally investigate if theoretically superior non-monotonic repayment contracts yield superior results in the laboratory. We find replacing standard debt contracts with repayment-equivalent non-monotonic contracts increases entrepreneurial income by 170% and total surplus by 30%.

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Bibliographic Info

Paper provided by Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization in its series Research Memoranda with number 053.

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Date of creation: 2007
Date of revision:
Handle: RePEc:dgr:umamet:2007053

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Web page: http://www.maastrichtuniversity.nl/web/UMPublications.htm

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Keywords: financial economics and financial management ;

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  1. Uri Gneezy & Aldo Rustichini, 2000. "Pay Enough Or Don'T Pay At All," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 791-810, August.
  2. Armin Falk & Michael Kosfeld, . "The Hidden Costs of Control," IEW - Working Papers 250, Institute for Empirical Research in Economics - University of Zurich.
  3. Kirchkamp, Oliver & Reiss, J. Philipp & Sadrieh, Abdolkarim, 2006. "A pure variation of risk in first-price auctions," Research Memoranda 058, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
  4. Irlenbusch, Bernd & Sliwka, Dirk, 2005. "Transparency and reciprocal behavior in employment relations," Journal of Economic Behavior & Organization, Elsevier, vol. 56(3), pages 383-403, March.
  5. Paul R. Milgrom, 1979. "Good Nevs and Bad News: Representation Theorems and Applications," Discussion Papers 407R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Innes, Robert D., 1990. "Limited liability and incentive contracting with ex-ante action choices," Journal of Economic Theory, Elsevier, vol. 52(1), pages 45-67, October.
  7. Martin Brown & Christian Zehnder, 2005. "Credit Registries, Relationship Banking and Loan Repayment," IEW - Working Papers 240, Institute for Empirical Research in Economics - University of Zurich.
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